Meaning of Ranges
Last updated
Last updated
On TON Blockchain liquidity providers can choose between two main options for deploying their liquidity: V2 pools (DeDust/STONfi) or V3 concentrated liquidity pools (TONCO DEX)
In V2 pools, assets are deposited in a ‘full range’ from 0 to ∞, covering every price point where they can be traded.
• Set and Forget: Once you deposit, it’s on autopilot • Constant Asset Ratio: Assets always maintain a 50:50 ratio • Uniform APR: All participants earn the same APR
TONCO DEX allows users to concentrate liquidity in specific price ranges.
Price Range represents the price window where liquidity is concentrated and trades are executed.
• Customizable Price Ranges: Liquidity can be provided within specific price bands • Dynamic Asset Ratios: The asset ratio changes with price movements • Active Management: Positions generate fees only if they cover the current price, requiring active position management • Variable APR: The narrower the range, the higher the share of generated fees, but also the higher the susceptibility to impermanent loss
Let’s say you want to provide liquidity to TON/USDT pool. The current TON price is $6.87, and you LP in a $6.17–$7.65 range 50:50 (6.87 USDT + 1 TON). The deposited liquidity will be used only within this range and you will gather fees only within this range. When it moves out of the range, the position remains open but inactive, earning no fees unless the price gets back to the range.
When the price moves within the range, the ratio in which you own the tokens changes. You started 50:50, but it changes until it’s 100:0 at the edges of the range.
Back to the example. The price of TON drops from $6.87 to $6.17, changing the token ratio from 50:50 to 100:0 and having a bit over 2 TON and 0 USDT in the LP position (as the ratio changes along the way, you end up with slightly more than 2x TON). If the price continues falling and you don’t adjust the position, you are fully exposed to the TON price and experience permanent loss.
The same applies when the price rises but in the opposite direction. If the TON price increases to $7.65, you are fully in USDT and have apx. $15 USDT in the LP position (as the ratio changes along the way, you end up with less than 2x USDT). But if the price continues to rise to $8, you get no additional gains because you are only in USDT.
Because of this, it’s important to constantly watch the prices and actively manage your position.
Less slippage By providing liquidity in specific ranges, LPing becomes more capital efficient as the liquidity is concentrated in narrower ranges compared to the infinite spectrum in V2. This results in less slippage when trading.
Increased Returns A narrower range means more assets available for trades and less competition within that range, translating into collecting more fees and potentially higher returns. This is why APR is higher than in V2 DEXes on TON.
Flexible Risk Management LPs can manage their risk more efficiently by setting a range that aligns with their risk tolerance and market view.
